The benchmark Nifty 50 ended the holiday-shortened week in losses as volatility continued to grip Dalal Street, keeping overall sentiment fragile. Although the index recovered in the latter part of the week, the rebound was not sufficient to turn the index positive, extending its losing streak to six weeks.
It finished the week with a modest decline of 0.22%, settling below the key 23,600 level after fluctuating by more than 500 points during the week. Compared with last week’s sharp 2% crash, the decline was relatively modest.
The index recorded a similar six-week losing streak during the second half of last year.
The recent weakness was not limited to India, with major Asian markets such as the Kospi, Nikkei 225 and Hang Seng also witnessing wide fluctuations during the week. However, their exposure to artificial intelligence-related stocks helped limit the losses.
The global backdrop for equities has remained weak, as rising tensions in the Middle East have kept crude oil prices elevated. Meanwhile, major central banks, including the US Federal Reserve and the Bank of Japan, have responded to raising inflationary pressures by lifting rates.
The Bank of Japan raised interest rates to a 31-year high and signalled its readiness to continue raising borrowing costs, while the US Federal Reserve announced a 25-basis-point hike and signalled further monetary tightening.
Although the US Fed rate could remain a near-term headwind for the markets, the US House of Representatives on Wednesday passed legislation giving President Donald Trump broad powers to impose sanctions on Russia and tariffs of up to 100% on countries that buy Russian oil and gas. The legislation will now go to Trump to be signed into law.
Meanwhile, the recent trend in crude oil prices appears to be easing, but prices remain elevated. If they remain high for a prolonged period, the risks from elevated crude prices are particularly significant, as India meets more than 80% of its crude oil requirements through imports.
Despite Indian Inc. reporting June-quarter earnings ahead of analysts’ estimates, they failed to revive investor sentiment, with overseas investors appearing to find better opportunities elsewhere in Asian markets, supported by their greater exposure to the artificial intelligence theme.
External pressures keep recovery fragile
Vinod Nair, Head of Research at Geojit Investments Limited, said looking ahead, domestic credit growth and PMI readings will provide a gauge of underlying activity, while US initial jobless claims and commentary from Federal Reserve officials will shape expectations on the rate trajectory and global liquidity conditions.
Nair said with geopolitical risk unresolved and foreign flows yet to revive meaningfully, the recovery remains contingent on further easing of external pressures. He said investors would therefore be prudent to remain selective, anchoring positions in businesses with visible earnings, resilient balance sheets, and valuations that leave an adequate margin of safety.
Nifty recovery hinges on 23,600 breakout
Ajit Mishra, SVP, Research at Religare Broking, said technically, the Nifty’s ability to sustain above the 23,200–23,300 zone provides some near-term stability after the recent decline.
Mishra said the broader trend remains cautious, with 23,400–23,600 emerging as the key resistance zone. He said a sustained move above 23,600 would strengthen the recovery, while 23,000–23,100 remains the crucial support area. He said for now, the focus should remain on selective opportunities, with a cautious and hedged approach preferred amid elevated crude prices, persistent FII selling, and global rate uncertainty.
Rupak De, senior technical analyst at LKP Securities, said the index remained sideways during the day as traders remained cautious ahead of the weekend. De said, “Besides, the index is seen consolidating around the previous swing low.”
The RSI has given a bullish crossover and is coming out of the oversold zone. In the coming days, if Brent crude remains below $96, we might see a sustained uptrend in the Indian market in the short term. For Nifty, De said the support is placed at 23,000–23,100 on the lower end, while on the higher end, the current recovery might take the index towards 23,550.
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